Income Tax on Gifts from NRIs and Relatives in India

This article is written by Aashish Ramchand, a Chartered Accountant by profession. Aashish is the co-founder of makemyreturns.com. He also has completed his CFA Level I (American) and is very passionate about writing articles on taxes and tax advisory. He can be reached atÂ connect@makemyreturns.com

Generally, gifts are not regarded as Income chargeable to tax. However by virtue of Section 56(2) any sum of money exceeding Rs. 50000 received without consideration by an individual or an HUF from any person is chargeable to tax as income under other sources subject to exclusions as below:

Receipts on occasion of marriage of the individual

Receipts under a will or inheritance

Receipts received from a relative.

Since 1/10/2009, Section 56(2) has been amended and the scope of gifts and will include even immovable properties or any other property besides sums of money under its ambit.

Gifts that are not taxable at all are those that are received from relatives. Relatives are defined by the following relationships of the individual:

Parents

Parents siblings and their spouse

Siblings

Spouse of siblings

Daughter and son

Spouse of daughter and son

Spouse

Spouse’s parents

Spouse’s siblings and their respective spouse.

Even NRIs are covered as long as they fall in the category of relatives. Therefore an individual Indian resident can receive a tax free gift from an NRI as long as he/she is that individuals relative. Any amount can be received as a gift from a relative. Also the purpose for which the gift is received from a relative is inconsequential as it is completely tax free. Thus a gift received can be used for any purpose ranging from purchasing shares to buying property to even simply keeping it with the bank.

Note on gifting on immovable properties

There is a valuation aspect involved in gifting of immovable properties:-

If the property is gifted without any consideration then if the stamp duty value exceeds Rs. 50000/-, stamp duty value will be taken

If the property is gifted for a consideration, then the actual value of the property will be taken

In case of other properties:

If gifted without consideration and fair market value exceeds 50000, then the fair market value will be taken as the final value

If gifted for a consideration and the FMV less consideration is greater than 50000, then the FMV less consideration amount will be taken as the value of the gift.

As mentioned earlier NRIs can also give gifts to resident Indians. Therefore, It is important to understand the meaning of an NRI as per the IT act.

An individual will be treated as a non resident in India in any previous year if he fulfils any of the following two conditions:

he/she is NOT in India in that year for period or periods amounting in all to 182 days or more, or

Having within the four years preceding that year NOT been in India for a period or periods amounting in all to 365 days or more, and has NOT been in India for 60 days or more in that year.

Just to add , Gift tax provisions has to be read in conjunction with the clubbing provisions which are detailed u/s 60-64 of income tax act 1961. These sections deal with the cases where tax payers make an attempt to reduce the tax liability by transferring / gifting their assets in favour of family members or by arranging their sources of income in such a manner that tax incidence falls on others, but in actual the benefit of income enjoyed by them. one needs a proper tax planning at every life stage by understanding tax provisions simultaneously. I’ve written a series of articles on tax planning at different life stages, hope it benefit the readers http://goodmoneying.com/tax-planning-2/tax-planning-tips-for-married-couple-with-kids.
Even one article on FPGI by me also throws light on this issue http://www.fpgindia.org/2012/11/spreading-the-income-golden-rule-to-save-tax.html

1. When you get a certain gift, that’s tax free for you but doesn’t make it tax free for the person who gifted it to you. So for your dad the money is still taxable if he hasn’t already paid tax on that.

2. Rs. 50,000 when it’s not from one of the relatives listed in the post, and there’s no upper limit as far as I understand when the gift is from a relative.

3. No.

Could Mani or Aashish please look at my responses and verify them as well? Thanks!

@ Sameer
1. Whatever you recieve from your dad will be tax free in your hand . There’s no question of recieving any tax exemption by your father. So manshu has replied it correctly.

2. Manshu is right here as well. As far as documentation is concerned, one may take a letter from the person giving gift stating the amount and reason (which can be love and affection). This letter should also state the Pan no. of the concerned giver.

3.No. but the gift given by your dad’s real elder brother will be tax free.

When one gets shares as gift or via a WILL, what are its taxation implications?? And does the beneficiary need to hold it for 1 year to avail of long term capital gain tax exemption in case he wishes to sell any??

Ah there it is! I was referring to this in my earlier comment on the NRI investment into direct equities.
So, tying up the 2 posts, a nri can gift to his parents and invest in the market through them, and transfer it back to his name once he get’s back to India.
of course the taxation on the gains from investing needs to be taken care by parents.

Thanks for the very useful ariticle especially list of people from whom one can receive gifts tax free. One question, regarding gifting of immovable properties, you have said that “If the property is gifted for a consideration, then the actual value of the property will be taken” can you please elaborate more on this? when you say property gifted without any consideration and gifted for a consideration what exactly does it mean??

Hi, Suppose I win a contest online which offers a gadget worth Rs. 30,000. Am I liable to pay gift tax? It’s within the limits but apparently the people are asking me to pay tax before sending the prize. Should I pay and then claim for a refund? Seems unneccessary but what if they push for it?

They have not given details. But have asked me to pay Rs 7500 to the Post ofice or a National Bank. First I thought it was all fraud…but now as I’m reading more, it seems fair.
When I checked online, gift tax is for 50k and above. Don’t know which category this will come under though.
Thanks for your help.

Like Nisha I too have won the same contest. I don’t think it can be termed as lottery as It was not a lucky draw but based on writing skill and our articles were selected from many of the enteried submitted. I conclude this after reading last 2 paragrafhs here :http://www.caclubindia.com/articles/section-194b-7636.asp#.USTGUx36Wjk.
Also they particularly asked us to pay “Gift Tax”. Is gift tax and tax on Gambling / Lottery not different.
Can you please tell me more on this.

Hmm, the act governing these two are different but after reading that link you sent it feels like there is more complication when the prize is based on some skill or something so I’m sorry but I can’t help you more on this.

can i gift some amount from my salary to my son ‘s bank a/c ( 20 yr old , studying in engineering, non-earning) and have a FD in his name. will interest on FD will be tax free. how much amount i can transfer each year. is there any limit. can i have demat a/c account in his name and invest in equities. will clubbing provision apply here.

Whatever interest earned on FD in your son’s name will be treated as income of your son and not yours. If your Son doesn’t fall in any income tax bracket than it will not be taxed. There’s no limit on gift from father to son or vice versa.
Even if you open d’mat account in your son’s name and earn some income out of investment, no income will be clubbed in your income

Hi,
My father had gifted me Rs.1,00,000. I want to invest them under various heads
viz.( equities, PPF, LIC etc.)
I want to know:
1] Do my father taxable income will come down by the gifted amount(in this case Rs. 1,00,000)?
2] Will the earnings from the investment be clubbed under my name or my Father?

P.S. Me & my father both file IT returns and fall under different tax slabs.

My nri son will gift me his flat and I would sell it and remit the amount in dollars to him in usa to pay for house bought thro libralised remittance scheme Introduced by rbi.
Please advice if I am to pay cap gain tax. This course is thought to avoid tax and financial burden if. He sells and transfers money. We solicit your advice’which will very
uch appreciated.

If I gift money to my wife and she uses it in her business and makes money, will I have to pay tax on gains/returns she makes from the investment? Basically do I need to club profit generated from investment made on money gifted to my wife with my income for tax purposes?

Yes praveen. The income generated out of your gift toyour wife will be clubbed in your income and will be taxed as per your IT slabs. So if you want to support her in her business, than rather giving gift, give money on loan.

sir i am 28years old girl.2 years back i had shifted my city n left my job bcz my boyfriend told me to leave my job.i m not working since then.he promised me to marry.but didnt fullfilled it.2 years now he is saying he is going to marry a girl of his family choice.and now my family is also against me.he told me that he will give me 50 lakh indian ruppees to compensate what he did to me.i m middle of nowhere.my question to is what is the proper way to take money from him.so that he will not create any problem to me regarding it in future.plz guide me and what will be the tax i have to pay for it.beacuse he is not my husband or any relative.thanks

There will be a tax liability in this case, as per the tax slabs.. There is no exemtion of any sort.
However, in case, you take money in name of someone who is a senior citizen, the tax liability may slightly reduce..

ONE OF MY CLIENT WANTS TO REMIT RS.50000/- TO RELATIVE IN US . MY QUESTION IS
UPTO WHAT LIMIT ONE CAN REMIT THE AMOUNT TO US
WHETHER ON ANY TRANSFER OF FUND WHETHER WE HAVE TO ISSUE CERTIFICATE IN
FORM 15CB

Hi – My building is being re-developed and our current apartment is in the name of my mother. I’d like to buy a bigger apartment in the new building for which I plan to take a loan. However, as the flat is in my mothers name – I won’t be able to take a loan directly. The general opinion is that she gifts me a part of the house (say 50%) and then I can apply for a loan on that 50% which can be used to buy a larger accommodation. My questions are: 1) Would I have to pay any tax on this gift as the estimated value will be around 70lacs. If yes, how much? 2) I just got married 2 months back – if she gifts this to me as a part of the marriage – would that still be taxable or is that exempt? Any other tips/suggestions would be very helpful. Thanks!

First of all thanks for this useful article. My father in law wants to gift two properties to my self and my wife. Will I have to pay anytax? The total value of both the properties is around 55-60 lakhs (going by market rates). The properties were acquired by my father in law only 2 years ago. My wife and I am are NRIs and my father in law is a farmer so he doesn’t pay any income tax.

my mother thru her savings in household expense money given by my father since their marriage in 1942 had a habit of converting it into gold and called it `Stree Dhan’.though a wealth tax assessee somehow this stree dhan never got into WT returns.6months prior to her death she made a gifdeed of that gold in my childs name for his wife etc.Is it legal ?If not what do we do?We do not have access to any records

Hi there,
I have a question about a property that my mother wants to gift me. It’s my parents current residence in Vijayawada, Andhra Pradesh. It needs to be reconstructed and its my my duty to put money towards construction cost. I am planning to take bank loan but I can not get it directly as its not on my name. So my mother planned to gift me this property. This property is worth about Rs. 40lakhs.
My question is:
How much percent if tax I have to pay?
I am an NRI yet Indian citizen. How does my status effect my current situation?

Please help me.
Currently I am in India so I would like to complete all the formalities (transferring, taking bank loan, planning and start work) before I leave in April.

Chaudhary, you don’t need to pay any tax on the gift recieved from your mother and neither your tax status (NRI or resident individual) has anything to do with it.
But yes, you may have to bear expenses like some stamp duty or registration/transfer charges on transferring the ownership of the asset in your name.

sir can u suggest a gift format for gifting a shares from father to son which can be used in case required to produce before govt authority? Further whether is there any stamp duty payable on such gift? whether clubbing provision would attract in case of short term cap gain?

You can give a gift to him but it won’t be tax free. It will be added to his income and then will be taxed accordingly. You will not have to pay additional tax for gift but you will have to pay whatever tax is applicable on how you earned this income.

Hi an NRI friend of mine wishes to transfer the property he had bought prior to settling overseas to his mother who is a senior citizen so that she stays comfortably. He is not likely to return to India and has taken UK citizenship. In this case my understanding is as follows :
1 – He has to execute a gift deed transferring this asset to his mother
2 – The mother has to pay stamp duty as per market value
3 – I also understand there will not be any tax implication either to him or his mother

Please correct if wrong

Kindly enlighten me as to what happens in case the mother decides she does not want the responsibility of maintaining another asset and decides to sell the property. What will be the tax implications in this regard?

Bharat, you mean gift recieved from NRE account or in NRE account? I guess you meant the former. If the gift above Rs 50k is recieved from a non relative living abroad than also the complete amount recieved will be taxable in your hands.

Whatever monetary gifts you exchange between each other will not be taxable in anyone’s hands.BUt if you or she invest that amount somewhere than the gain will be added in the income of one whose income is on higher side.
You can gift any amount to your daughter, but the income generated out of that will be clubbed in your income (over and above Rs 1500/- p.a)

hi,
how is the gift tax calculated. is the gift amount taken as a part of your total income or is it taxed under a seperate category.
for example, if i have an income which falls into 10% slab , but i receive a gift of say 5 lacs from my mother,
a) will it raise my tax slab to 30% ( income more than 8 l)
b) how much tax exactly will my mother will have to pay on an amount of 5 lac

thanks manshu,
but this is quite confusing…i was under the impression, that the person who receives gift , doesn’t have to pay tax, but the one who is gifting has to ..
please clarify..
also how much tax ( please tell me the figure) one has to pay on an amount of 5 lac…is it of the order of 25%..

No Charu, the person giving the gift doesn’t have to pay tax since it is assumed that they have already paid tax on the income they generated which is the source of this gift.

The person receiving the gift has to pay tax as this is like an income source for them. So in your case, when you get the gift from someone who is not a relative as defined by the IT Act, that will be added to your income, and as a result you will have to pay tax. Over 5 lakhs is 20% plus surcharge, so it will be something like that. Though it really depends on what other deductions you get based on your expenses, savings etc. so I can’t tell you an accurate figure, but over 5 lakhs is 20% and less than that is 10% approximately.

please note that the person giving me the gift is my mother as i told in my first statement and kindly reread the query and clarify.
also can we make a gift deed retrospectively if the money involved was transferred through RTGS..

Even after reading your questions again, I think I have already answered them. You should probably post them in another forum where someone can do a better job of understanding what you are saying and answering it.

My father’s brother’s wife and daughter wish to gift me a land with building property valued at Rs 2.oo crores (current valuation of property for stamp duty purpose). State Stamp Duty rules do not recognise this as a Gift from a relative. and as such, stamp duty has to be paid accordingly. However, I wish to know the status of this Gift as per the Income Tax rules ie whether I have to pay Gift tax on the value of this property?

Thanks for the response. Here the Gift is from both the father’s brother’s wife and daughter (wide and daughter jointly own the property). I understand that gift from the father’s brother’s wife is tax-free, but does that extend to a gift from the father’s brother’s daughter also.

Have two queries
1. if my father give Rs 200000 to my son , who is 14 years old , will it be added in my income and will be taxable. my son is not having any PAN
2. Same amount if he gives to my wife, who has her PAN no, will it be clubbed with my income ?

in both the cases, how the interest (if the amount is deposited in bank) will be taxed.

Bipin, gifts from non relatives (including friends) are non taxable if recieved upto Rs 50k in total. If the total gifts in a year from non relatives exceeds Rs 50k than total amount with no exemption of Rs 50k will be added in your income and taxed as per slabs.

Hi,
I am going to be marry next month and have few questions:
1. how much amount can my parents in law gift to me tax free.
2. How much they can gift to their daughter tax free.
3. Can they gift anything like cash,gold, car, equity etc? are all of them would be tax free.
4. Suggest me the best way so that no gift tax arise in marriage.
5. Agter marriage suppose 6 months or so can they gift anything will it be considered tax free.

1. before marriage they are not your parents in law and thus limit of non relatives will apply.
2. Any amount.
3. To daughter …yes.
4. Gifts recieved on the marriage are totally tax free. Just from income tax perspective you have to keep record of each and every gifts and the person from whom you are recieving it. in case it is asked by authorities and to prove that these are marriage gifts.
5. yes.

Just a tax planning advise…if your would be spouse is a non working girl and thus has no tax file, then better to recieve all gifts in her name, so you can build up a good tax file for her. This will considerably reduce your tax liability.which may arise out of interest or any other income after investing these marriage gifts. Also this tax file will help you in long term.

Please consider updating your original article to include the FCRA reporting requirement by receiving individual for Rs. 1 Lakh or more.

See below from Home Ministry Website.
Q.10 Whether foreign remittances received from a relative are to be
treated as foreign contribution as per FCRA, 2010?
Ans. The position in this regard as given in Section 4(e) of FCRA,
2010 and Rule 6 of FCRR, 2011 are as under:
Subject to the provisions of section 10 of the FCRA, 2010, nothing
contained in section 3 of the Act shall apply to the acceptance, by
any person specified in that section, of any foreign contribution
where such contribution is accepted by him from his relative.
However, in terms of Rule 6 of FCRR, 2011, any person receiving
foreign contribution in excess of one lakh rupees or equivalent
thereto in a financial year from any of his relatives shall inform the
Central Government in Form FC-1 within thirty days from the date of
receipt of such contribution. This form is available on the websitehttp://mha.nic.in/fcra/forms/fc-1.pdf

Hi Sir.. I want to invest in a commercial property in the name of my house wife, further as I was away from India for the past 11 Months continously I stand to be a NRI. In that case will there by any tax implications on me or my spouse if I transfer the money to invest in this property from my NRE account to my wife’s normal savings account and she makes the payment and get the property purchased in her name ?? Please advise !

Manikandan, Whatever investment you want to make in the name of your spouse (who’s a housewife) , the income generated from that investment will be clubbed in your income and taxed accordingly. It doesn’t matter if you are NRI or not. Rules of clubbing are same for everyone.

I’ve read with great interest the advise provided to the many people with concerns regarding tax and property.
Iâ€™m a UK resident born and raised in UK and my parents both born and raised in India however married in the UK 42 years ago.
My grandfather purchased land 20 years ago which my father inherited following my grandfatherâ€™s death. My father died 2 years ago without leaving a will and my investigations revealed that ownership & title will automatically fall to the legal heirs.
My questions is if I sell the property/estate with a current market value 7crore what % tax are we required to pay? And the best way to move the cash back to the UK.?

I have booked / purchased a flat in my Name in Marâ€™13 in which my father has contributed a sum of Rs. 23.7 Lacs and further he plans to contribute a sum of Rs. 5 Lacs at the time of registration & possession of the property. The amount of Rs. 23.7 lacs. was directly paid to the builder from his account through cheque.
What steps should he take to regularize this transation so that there are no tax / legal implication?
Further If Gift Deed is the way then what are the ways to make a Gift Deed?

Hi,
I am a government employee and i wish to trade in stock futures through my mother’s(a house wife without any income) account.
1. If i gift her some amount and she invests it and makes profit would it be considered as my income or her income ?
2. If I give the amount as a loan will there be any advantage ? Or would it be better if my wife gives the money to my mother?
3. My wife is not working and is not having any income.

1.) her income
2.) Nope. as you are into service so you cannot show this as business expenses. So gift ot loan will hardly make any difference.
3.) If you gift your mother through your wife who herself is not working. This will make things bit complex. It may lead clubbing of income in your name.

Good Morning Sir,
1. I am Tax Consultant, I want to know that my client (Female) want to give gift of Rs. 2/- lacks to her Husband. So from the definition of Relative it is exempted from tax liability but how can I display this in IT return that she/he given or received gift in their IT return as per IT Act.

2. Whether the gift given or taken is necessary to take in written form? If yes, in which manner.

There’s a property on my mother’s name and we need to sell it in few days. We plan to re-invest Capital gains in form of new property and tax saving bonds. I want to know if my mother could gift me a part of her capital gain as a gift immediately after sale of property( in the form of new property or tax saving bonds) with zero tax gain on these funds. Following are the two ways which I can think of : 1) She buys a new property in my name and could show that in her capital gain investment. 2) She buys a new property in her name only and then immediately transfers it to me without any tax gain. Please help me and suggest some possible way for this situation.